Reference: 18_04
A firm sells two products, A and B. For every unit of A the firm sells, two units of B are
sold. The firm’s total fixed costs are $1,612,000. Selling prices and cost information for
both products follow:
The weighted-average contribution margin is:
A. $14.67
B. $17.33
C. $16.00
D. $18.00
E. $15.00
Answer:
The main purpose of adjusting entries is to:
A. Record external transactions and events.
B. Record internal transactions and events.
C. Recognize assets purchased during the period.
D. Recognize debts paid during the period.
E. Correct errors.
Answer:
Obligations due to be paid within one year or within the company’s operating cycle,
whichever is longer, are:
A. Current assets
B. Current liabilities
C. Earned revenues
D. Operating cycle liabilities
E. Bills
Answer:
Given the following information:
What is the amount that needs to be recorded for cash over and short?
A. Debit $23.29.
B. Credit $23.29.
C. Debit $18.78.
D. No cash over and short is necessary.
E. Credit $18.78.
Answer:
Dividing ending inventory by cost of goods sold and multiplying the result by 365 is
equal to the:
A. Inventory turnover ratio
B. Profit margin
C. Days’ sales in inventory
D. Current ratio
E. Total asset turnover
Answer:
Blackbird, Incorporated reports the following information regarding its production cost:
a. Compute production cost per unit under variable costing.
b. Compute production cost per unit under absorption costing.
Answer:
A controlling influence over the investee is based on the investor owning voting stock
exceeding:
A. 10%
B. 20%
C. 30%
D. 40%
E. 50%
Answer:
The Cash Over and Short account:
A. Is used to record a credit balance in the cash account.
B. Is an income statement account used for recording the income effects of cash
overages and cash shortages from errors in making change and from missing petty cash
receipts.
C. Is not necessary in a computerized accounting system.
D. Can never have a debit balance.
E. Can never have a credit balance.
Answer:
The difference between a company’s assets and its liabilities is:
A. Net income
B. Expense
C. Equity
D. Revenue
E. Net loss
Answer:
A statistical method for deriving an estimated line of cost behavior is the:
A. Scatter diagram method.
B. High-low method.
C. Composite method.
D. CVP charting method.
E. Least-squares regression method.
Answer:
The Dina Corp. has applied overhead to jobs during the period as follows:
The application of overhead has resulted in a $5,600 credit balance in the Factory
Overhead account, and this amount is not material. The entry to dispose of this
remaining factory overhead balance is:
A. Cost of Goods Sold 5,600
Factory Overhead
5,600
B. Factory Overhead 5,600
Cost of Goods Sold
5,600
C. Factory Overhead 5,600
Goods in Process
5,600
D. Goods in Process 5,600
Factory Overhead
5,600
E. No entry is needed.
A. Journal entry A
B. Journal entry B
C. Journal entry C
D. Journal entry D
E. Journal entry E
Answer:
A method that charges the same amount of expense over each period of the asset’s
useful life is called:
A. Accelerated depreciation.
B. Declining-balance depreciation.
C. Straight-line depreciation.
D. Units-of-production depreciation.
E. Modified accelerated cost recovery system (MACRS) depreciation.
Answer:
The accounting principle that requires accounting information to be based on actual
cost and requires assets and services to be recorded initially at the amount of cash or
cash equivalent given in exchange is the:
A. Accounting equation
B. Cost principle
C. Going-concern principle
D. Realization principle
E. Business entity principle
Answer:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to
Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson
uses the perpetual inventory system. Alberts pays the invoice on October 8 and takes
the appropriate discount. The journal entry that Robertson makes on October 8 is:
A.
B.
C.
D.
E.
Answer:
Reference: 21_05
A job was budgeted to require three hours of labor per unit at $8 per hour. The job
consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of
$198,000.
What is the total labor efficiency variance?
A. $22,000 unfavorable
B. $16,000 unfavorable
C. $6,000 unfavorable
D. $16,000 favorable
E. $22,000 favorable
Answer:
When a bond sells at a premium:
A. The contract rate is above the market rate.
B. The contract rate is equal to the market rate.
C. The contract rate is below the market rate.
D. It means that the bond is a zero coupon bond.
E. The bond pays no interest.
Answer:
On January 1, 2013, Jacob issues $800,000 of 9%, 13-year bonds at a price of 96½. Six
years later, on January 1, 2019, Jacob retires 20% of these bonds by buying them on the
open market at 105½. All semiannual interest is accounted for and paid through
December 31, 2018, the day before the purchase. The straight-line method is used to
amortize any bond discount or premium. What is the journal entry to record the
retirement of 20% of the bonds on January 1, 2019?
A.
B.
C.
D.
E.
Answer:
Which of the following errors would cause the Balance Sheet columns of a work sheet
to be out of balance?
A. Entering an asset amount in the Income Statement Debit column.
B. Entering a liability amount in the Income Statement Credit column.
C. Entering an expense amount in the Balance Sheet Debit column.
D. Entering a revenue amount in the Balance Sheet Debit column.
E. Entering a liability amount in the Balance Sheet Credit column.
Answer:
Blaircraft Company manufactures a product that requires five pounds of raw material
for each unit produced. For the next year, beginning inventory of raw materials is 8,000
pounds. The raw materials inventory at the end of each quarter should be 15% of the
next quarters raw materials needed for production. Given the projected production in
units below, what is the quantity of raw materials that needs to be purchased for the
third quarter?
A. 41,500 pounds
B. 40,000 pounds
C. 38,500 pounds
D. 7,7000 pounds
E. 8,300 pounds
Answer:
On September 30, the Cash account of Value Company had a normal balance of
$5,000. During September, the account was debited for a total of $12,200 and credited
for a total of $11,500. What was the balance in the Cash account at the beginning of
September?
A. $0 balance
B. $4,300 debit balance
C. $4,300 credit balance
D. $5,700 debit balance
E. $5,700 credit balance
Answer:
Lukin Corporation reports the following first year production cost information:
a. Compute production cost per unit under variable costing.
b. Compute production cost per unit under absorption costing.
c. Determine the net income using variable costing.
d. Determine the net income using absorption costing.
Answer:
On July 22, a company that uses the perpetual inventory system purchased
merchandise inventory at a cost of $5,250 with credit terms 2/10, net 30. If the
company pays for the purchase on August 1, what would be the appropriate journal
entry?
A.
B.
C.
D.
E.
Answer:
A company’s normal operating range, which excludes extremely high and low volumes
that are not likely to occur, is called the:
A. Margin of safety.
B. Contribution range.
C. Break-even point.
D. Relevant range.
E. High-low point.
Answer:
Match the following terms with the appropriate definition(s):
A. Accounting information system
B. Business segment
C. Cash receipts journal
D. Control principle
E. Relevance principle
F. Enterprise resource planning
G. Cash disbursements journal
H. Computer network
I. Information processor
J. Schedule of accounts receivable
Answer:
A ledger is:
A. A record containing all accounts (with amounts) for a business.
B. A journal in which transactions are first recorded.
C. A collection of documents that describe transactions and events during the
accounting process.
D. A list of all accounts with their debit balances at a point in time.
E. A list of all accounts a company uses and includes an identification number assigned
to each account.
Answer:
Adidas issued 10-year, 8% bonds with a par value of $200,000, where interest is paid
semiannually. The market rate on the issue date was 7.5%. Adidas received $206,948 in
cash proceeds. Which of the following statements is true?
A. Adidas must pay $200,000 at maturity and no interest payments.
B. Adidas must pay $206,948 at maturity and no interest payments.
C. Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each.
D. Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
E. Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.
Answer:
When all of the authorized shares have the same rights and characteristics, the stock is
referred to as:
A. Preferred shares under both IFRS and GAAP.
B. Common shares under both IFRS and GAAP.
C. Plain shares under IFRS and common shares under GAAP.
D. Simple shares under IFRS and pure shares under GAAP.
E. Share capital under IFRS and common shares under GAAP.
Answer:
Schmidt Inc, manufactures inexpensive cameras that sell for $50. Fixed costs are
$720,000 and variable costs are $30.00 per unit. Schmidt can buy a newer production
machine that will increase fixed costs by $14,400 per year but will increase variable
costs by 10% per unit. What are the original and the new break-even points in this
situation?
A. Original $43,200; New $36,720.
B. Original $36,000; New $36,720.
C. Original $36,000; New $42,353.
D. Original $36,000; New $43,200.
E. Original $24,000; New $41,506.
Answer:
A company manufactures and sells a product for $150 per unit. The company’s fixed
costs are $68,200, and its variable costs are $95 per unit. The company’s break-even
point in units is:
A. 718 units
B. 455 units
C. 1,240 units
D. 1,364 units
E. 1,137 units
Answer:
In the accounting records of a defendant, lawsuits:
A. Are estimated liabilities,
B. Should always be recorded,
C. Should always be disclosed,
D. Should be recorded if payment for damages is probable and the amount can be
reasonably estimated,
E. Should never be recorded,
Answer:
Which of the following factors is least likely to be considered in preparing a sales
budget?
A. Plant capacity.
B. General economic and industry conditions.
C. Past sales volume.
D. The capital expenditures budget.
E. Proposed selling expenses, such as advertising.
Answer:
Effective accounting information systems will do all of the following except:
A. Collect data from transactions and events.
B. Organize data in useful forms.
C. Communicate information to business decision makers.
D. Process data from transactions and events.
E. Eliminate all errors.
Answer:
Amortization:
A. Is the systematic allocation of the cost of an intangible asset to expense over its
estimated useful life.
B. Is the process of allocating to expense the cost of a plant asset to the accounting
periods benefiting from its use.
C. Is the process of allocating the cost of natural resources to periods when they are
consumed.
D. Is an accelerated form of expensing an asset’s cost.
E. Is the same as depletion.
Answer:
The person to whom a note is payable to is known as the ______________.
Answer:
To compute the amount of tax withheld from an employee’s pay, employers can use a
_______________________________________________________ table.
Answer:
There are at least five benefits from budgeting. Identify two of these benefits:
(1)_______________________________________
(2)_______________________________________
Answer:
The summary amounts below appear in the Income Statement and Balance Sheet
columns of a company’s December 31 work sheet. Prepare the necessary closing
entries.
Answer:
A company established a petty cash fund in May of the current year and experienced
the following transactions affecting the fund during May:
May 1 Establish petty cash account in the amount of $300.
May 5 Paid for miscellaneous office supplies in the amount of $53.22.
May 9 Reimbursed human resource manager for business lunch, $45.09.
May 15 Paid for minor landscaping services, $75.
May 22 Paid $65.00 for postage.
May 31 Counted remaining cash and discovered that $56.34 remained.
Prepare the journal entry to reimburse the fund on May
Answer:
When the maker of a note is unable or refuses to pay at maturity, the note is said to be
___________________.
Answer:
What are the ways a partner can withdraw from a partnership? Explain how to account
for the withdrawal of a current partner from a partnership.
Answer:
Explain the accounting equation and define its terms.
Answer:
__________________________ is the process of allocating the cost of plant assets to
their expected useful lives.
Answer:
Davison Company has fixed costs of $315,000 and a contribution margin ratio of 24%.
If sales are expected to be $1,500,000, what is the margin of safety in percent?
Answer:
What are the accounting basics for debt securities, including recording their
acquisition, interest earned and their disposal?
Answer:
A company has total fixed costs of $200,000. Its product sells for $25 per unit and
variable costs amount to $15 per unit. The company wishes to earn an after-tax income
of $35,000. Assume that the company has a 30% tax rate. How many units must be sold
to achieve this after-tax income level?
Answer:
Josephine’s Bakery had the following assets and liabilities at the beginning and end of
the current year:
If the owners made no investments in the business and no dividends were paid during
the year, what was the amount of net income earned by Josephine’s Bakery during the
current year?
Answer:
A partnership that has at least two classes of partners, general and limited, that allows
the limited partners to have no personal liability beyond the amounts they invest in the
partnership, and in which the limited partners have no active role except as specified in
the partnership agreement is a ________________________ partnership.
Answer:
What is the acid-test ratio? How does it measure a company’s liquidity?
Answer:
Describe the internal controls that must be applied when taking a physical count of
inventory.
Answer:
A corporation had current year net income of $2,375,000. It paid preferred dividends of
$80,000 cash and had 500,000 weighted-average shares of common stock outstanding.
Calculate the corporation’s earnings per share.
Answer: